Project finance

A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z

What is Project finance?

Project finance is a structured finance solution. It is used to pay for the construction and operation of projects such as wind farms, hydroelectric dams or highways. It is long-term financing. Debt-repayment is mainly based on cash flows generated from the completed project. Project financing includes infrastructure financing as well as PPPs (Public Private Partnerships).

A Project finance usecase

Let's take the case of a company that wants to build and operate a highway. Instead of taking on debt directly, this company will create a legal entity called a Special Purpose Vehicle (SPV), into which it will inject cash in the form of capital. This makes the company the sole owner/shareholder of the SPV – but it is actually the SPV that will be borrowing from banks in order to finance the project. Once the project is built, it is the financial results (cash flows) from the project that will enable repayment of the debt.

schema

What are the advantages of Project finance for a company?

For the company sponsoring the project, the advantages are multiple:

  • reduces the risks in in the event the project fails, since any losses are limited to the amount of capital brought into the SPV (contrary to a direct loan taken out by the company);
  • enables the financing of large projects with minimal investment, since the debt represents a significant part of the financing and the client(s) only contributes the capital;
  • distributes risk and expertise among different stakeholders since an SPV can be owned by several companies
  • the debt is generally provided by several banks or institutional investors in order to mutualize/share the risks.

Role of the bank

The bank acts as an advisor. It helps to structure the project by defining the risks of the project and the means to cover them, both at the financial level (definition of the amounts of capital and debt, definition of the levels of senior and mezzanine debt) and at the legal level. The bank finances and recruits additional investors to help finance the project (syndication). It can also act as an agent, i.e., as an intermediary between the client and the project's lenders.

Project finance: for what sectors?

schema

Discover

Our Project Financing Solutions

Our latest news and insights

Reviving Water: Sustainable Solutions for a Scarcity-Stricken Future
By Yannick Ouaknine, Head of Sustainability Research at Bernstein, and Virgile Haddad, Sustainability Analyst at...
Expert views
By Yannick Ouaknine, Head of Sustainability Research at Bernstein, and Virgile Haddad, Sustainability Analyst at Bernstein.
Reviving Water: Sustainable Solutions for a Scarcity-Stricken Future
Supporting a family-owned agribusiness in its strategy to become a global pharma leader
Founded over 90 years ago, Roquette is a French family-owned global leader in plant-based ingredients and a leading...
Clients' successes
Founded over 90 years ago, Roquette is a French family-owned global leader in plant-based ingredients and a leading provider of pharmaceutical excipients. With a long-term vision, Roquette undertook its first public issuance in 2024 and executed the largest acquisition in its history in 2025 to establish itself as a leader in the pharmaceutical sector. Societe...
Supporting a family-owned agribusiness in its strategy to become a global pharma leader
The €14 trillion question: Can Europe finance its own future? (ft Anne-Christine Champion)
Europe, once the driving force of global progress, gave birth to the Industrial Revolution, Enlightenment ideals,...
Podcasts
Europe, once the driving force of global progress, gave birth to the Industrial Revolution, Enlightenment ideals, innovative scientific discoveries, and a cultural renaissance that shaped modern civilization. However, today, amid trade wars, geopolitical crises and industrial and technological advancements, Europe finds itself at a critical crossroads.
The €14 trillion question: Can Europe finance its own future? (ft Anne-Christine Champion)
More results google link